The Big Lie and the Big Bust

Of all the lies that the American people have been told the past four decades, the biggest one may be this: We'll all come out ahead in the shift from an industrial to a postindustrial society. Yes, we were counseled, there will be major dislocations, as there were during the transition from an agrarian to an industrial economy, but the America that will emerge from this transformation, like the America that emerged 100 years ago, will be one whose citizens are ultimately more prosperous and secure than their industrial-era forebears.

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The America that's replaced the vibrant industrial giant of the mid 20th century is a basket case. We've lost the jobs that created the broadly shared prosperity that made us the envy of the world. In their place, when we've created jobs at all, they've generated neither prosperity nor security.

The most prescient writer on postindustrial America offered a sobering perspective. In his 1972 book The Coming of Post-Industrial Society, sociologist Daniel Bell predicted a future of service jobs, rising consumption, compensatory entitlements and wars over taxes.

Even as Bell's prophecies began to be borne out, though, the champions of the new economic order — from General Electric's Jack Welch to every New Democrat and any old Republican — assured us that America would flourish as a postindustrial innovator in the new global economy, crafting the cutting-edge technologies whose actual assembly we could relegate to less-skilled work forces on distant shores.

Today, the economy that arose on manufacturing's ashes has turned to ashes itself. The Wall Street-Walmart economy of the past several decades offshored millions of factory jobs, which it offset by creating low-paying jobs in the service and retail sectors; extending credit to consumers despite stagnating incomes; and fueling, until it collapsed, a boom in construction.

We are only now beginning to understand the toll this economy has taken on America's workers — and on our working men in particular. A stunning study from Michael Greenstone and Adam Looney of the Hamilton Project, published in the Milken Institute Review, reveals that the median earnings of men ages 25 to 64 declined 28 percent between 1969 and 2009. Within this age group, the median earnings of men who completed high school but didn't go on to college fell 47 percent, while the median earnings of male college graduates also declined, if only 12 percent.

Part of this decline stems from the shrinking share of working-age men with full-time jobs, which fell from 83 to 66 percent between 1960 and 2009. The other part stems from the fall in inflation-adjusted median yearly earnings of working-age men who have full-time jobs, which have shrunk by about $5,000 since the mid '70s. Combined, write Greenstone and Looney, these two declines explain why the earnings of American men "haven't been this low since Ike was president."

Anyone seeking to understand the pessimism, frustration and rage of working-class men needs to begin here, with Greenstone and Looney's 2-by-4-to-the-head tale of decline. White working-class men in particular have become a disproportionately receptive audience for those who scapegoat immigrants and minorities for the damage that has actually been caused by economic and political elites blissfully blind to the devastation ushered in by their vaunted new economy.

Since that new economy blew up three years ago, many of those elites have been disabused of the financial fantasies that ordinary Americans long ago ceased to entertain. The fact that Greenstone and Looney's study emerged from the Hamilton Project — a pillar of new-economy thinking — is evidence of a paradigm shift in economic vision. From centrist Democratic groups such as the Progressive Policy Institute and Third Way, to economists such as Hoover Institution Nobel laureate Michael Spence, to chief executives and former chief executives such as Dow Chemical's Andrew Liveris and Intel's Andy Grove, the new watchword for America's future — however challenging it may be to get there — is manufacturing.

Postindustrial America turned out to be a bust. The time for neoindustrial America has arrived.